Fewer Markets, Bigger Profits
Video interactivity provider Zentrick
The story of Zentrick illustrates the impact that focusing on the core can have.
Zentrick is a New York-based scaleup with roots in Belgium. They sell a video interactivity layer to advertising technology platforms (DSPs and SSPs). The product provides market-standard video measurability and interactivity without in-house development.
CTO Pieter Mees told me about the turnaround Zentrick has accomplished in the last two years.
Hedging Bets on Several Market Segments
“As a startup four years ago, we were eager to find traction for our video interactivity solution. So we tried as many market segments as possible. From platforms to brands and from agencies to measurability providers.
Technology Scales, Go-to-Market Does Not.
“We are all engineers and computer scientists. In class we learn that the bigger you scale your technology, the more efficient you become. But they forget to tell you in engineering school that the go-to-market doesn’t scale.
“We were trying to build market positions in three different segments at the same time. Without a chance of reaching a dominant position in any single one of them.
Disrupters Focus on Market Power
“Any startup, angel and VC wants to see more growth than profit in the short term. But it is also crucial to keep your eye on building market power over time. So that you reach your aim of real market disruption. And can at least project outsized profits at a future horizon.
“Comparing our different customers’ needs, pain points and willingness-to-pay was eye-opening. It became obvious that advertising technology platforms should be our first core customer.
Making up for Lost Revenue
“Foregoing revenue potential in the other segments was hard. But we stuck to focusing our go-to-market completely on these technology platforms.
“And you know what happened? We were able to focus our product value more on this core customer. This made the product more attractive to them. So our pricing power increased.
“Within a year, we almost made it back to our previous sales number. But now from only one segment where we were finding increasing market power.
Key to Reaching Profitability
“Even more surprising, we made those sales with only half the people we used to have. This turned Zentrick profitable even while we are still on our A round funding. We are well on track now to reach product-market-domination.
More Attractive to Investors
“We are still a growth company and of course we want to grow much further. But now we have the luxury to attract funding at a much higher valuation.
“Or we can decide to forego funding altogether for now. And increase our market power in an organic way.
Stop Pivoting After Product-Market-Fit
“We learned from this episode that product-market-fit in one segment is all you need. After you find it, your focus has to move to product-market-domination.
“Stop pivoting or trying to find product-market-fit in other segments. Or attacking all these attractive revenue opportunities at once. All you will do is dilute your efforts. You build up lots of extra cost without a corresponding increase in revenue.
Strong Core as Base for Further Growth
“I do see Zentrick grow beyond just advertising technology platforms of course. But now we can do that from a position of strength. And that is so much better then trying to conquer three markets from a position of nothing.”